Thursday, November 18, 2010

Pfizer Ordered to Pay $95 Million for Deceptive Marketing of Neurontin

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

Pharmaceutical company Pfizer, Inc. violated the California Unfair Competition Law (UCL) by marketing its prescription drug Neurontin for a number of off-label uses and deceptively representing the efficacy of the drug for certain uses, according to the federal district court in Boston.

Based on these violations, Pfizer was ordered to pay restitution of more than $95 million to the Kaiser Health Care Plan for its payment of reimbursements in excess of the cost of alternative drugs that would have been as effective as or more effective than Neurontin.

Off-Label Marketing

Neurontin was approved by the Food and Drug Administration for the treatment of epilepsy in 1993, but Pfizer began marketing the drug for the treatment of migraines, bipolar disorder, and other conditions for which there was no scientific proof.

After spending about $200 million on Neurontin from 1996 to 2004, Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals (collectively Kaiser) filed the UCL claims—along with civil RICO claims—in federal district court in Boston.

In March 2010, a jury found that Pfizer engaged in a RICO enterprise that committed mail and wire fraud in the marketing of Neurontin and awarded Kaiser more than $47 million, which was trebled to more than $142 million. The court then took up the issue of whether the conduct violating the federal RICO law also violated the UCL.

Fraudulent Business Practices

In order to state a claim under the fraud prong of the UCL, Kaiser needed to show that members of the public were likely to be deceived by the misrepresentations and false advertising. Evidence of actual reliance on the misrepresentations was also required. Reliance is proven through evidence that the misrepresentation was an immediate cause of the injury-producing conduct and that the injury would not have happened but for the misrepresentations.

Kaiser presented sufficient information to meet the causation requirement of the UCL, according to the court. The UCL requires evidence of an actual reliance on the alleged misrepresentations. It was reasonable to conclude that Kaiser would not have sanctioned the use of Neurontin had it known of the misrepresentations about the efficacy of the drug and that physicians would have changed their prescribing behavior had Kaiser changed its policy towards Neurontin.

Standing

Pfizer argued that Kaiser Hospitals did not have standing because it did not actually purchase the drugs. However, Kaiser Foundation Health Plan was partnered with Kaiser Hospitals, and Kaiser Foundation Health Plan had standing to bring the claim. Thus, a ruling on independent standing was unnecessary. Any damages would be awarded to the health plan.

Pfizer further argued that Kaiser could not recover damages under the UCL for the cost of Neurontin prescriptions written outside of California. However, Massachusetts choice-of-law rules apply the law of the state where a plaintiff takes action in reliance on misrepresentations. Thus, the UCL applied because Kaiser was located in California, was targeted by the company in California with the false representations, and relied on the misrepresentations in California.

Statute of Limitations

Although the law in California as to whether the discovery rule applies to UCL claims as a whole is unsettled, the rule applied in this case because the claims were based on fraud. Courts have also applied the fraudulent concealment rule to UCL claims. Pfizer argued that many of the claims in the multidistrict litigation were barred by the UCL four-year statute of limitations because the claim was filed more than four years after the allegedly illegal activity took place.

Pfizer fraudulently concealed the negative testing and information that formed the basis of the UCL claim, according to the court. The claim accrued in 2002 when the fraud became known publicly through a whistleblower suit filed against the company. The unsealing of a related suit in Delaware did not put a hospital in California on notice.

Remedies

The UCL empowers courts to restore any money or property that may have been acquired by means of such unfair competition. Kaiser could recover amounts it paid for the drug as a result of the misrepresentations even though the hospital purchased the drug through a wholesaler or other intermediary rather than directly from Pfizer. The appropriate measure of damages was the difference between the cost of the drug and the cost of the cheaper and more optimal drug that would have been prescribed, according to the court.